Mortgage Refinances Drive Activity as Mortgage Rates Continue to Slip

Home affordability has been high for much of the year, as mortgage rates have been at less than 4 percent for all but one week in 2012, and that trend continued in the period ending Dec. 7 as well.

At the end of that week, home loan rates slipped to just 3.47 percent on 30-year fixed loans, according to the latest data issued by the Mortgage Bankers Association. That was the all-time lowest rate ever observed by the group, and was also down from 3.52 percent the previous week. Points on those loans also slipped to 0.36 from 0.41 during that time. Meanwhile, similar loans backed by the Federal Housing Finance Agency had rates slip to 3.32 percent, also a record low, from 3.34 percent.

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Further, interest rates for 15-year fixed-rate mortgages slipped to a record low as well, at 2.85 percent, from the previous week's 2.86 percent, the report said. Points for these loans also fell to 0.26 from 0.27.

The lower rates also seemed to encourage more mortgage activity, though this was entirely in refinances, the report said. Overall, total mortgage application volume surged 6.2 percent, driven by an 8 percent spike in refinances. At the same time, purchases rose 1 percent.

In all, refinances accounted for 84 percent of all loan applications filed with lenders last week, up from the previous week's 82 percent, the report said. This indicates that many current homeowners have observed the continued low rates in the industry and wanted to make moves to reduce the cost of their current mortgages.

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"Continued uncertainty due to the lack of resolution regarding the fiscal cliff led interest rates lower last week, with mortgage rates reaching a new low in our survey," said Mike Fratantoni, the MBA's vice president of research and economics. "Refinance activity increased, with the refinance index hitting its highest level in two months, and the refinance share reaching its highest level since January 2009. Applications for purchase increased for a fifth consecutive week, and are running almost 10 percent above their level at this time last year."

It's believed that thanks to the Federal Reserve Board's bond-buying efforts, known as QE3, that interest rates for home loans and other types of credit will remain low for at least the next year or more, granting more affordability to both current and potential homeowners who want to take advantage of the best deals possible.